<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter ended Commission File Number
September 30, 1997 33-19038
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(Exact name of registrant as specified in its charter)
MISSOURI
(State or other jurisdiction of incorporation or organization)
43-1507816
(I.R.S. Employer Identification No.)
6300 LAMAR, P.O. BOX 29217, SHAWNEE MISSION KANSAS 66201-9217
(913) 236-2000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
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PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Table of Contents
Part I - Financial Information
Financial Statements: Page
Balance Sheets - September 30, 1997 and
December 31, 1996 3
Statements of Income for the Quarters and Nine
Months Ended September 30, 1997 and 1996 4
Statements of Cash Flow for the Nine Months Ended
September 30, 1997 and 1996 5
Notes to Financial Statements 6-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 12
Item 2. Changes in Securities. 12
Item 3. Default Upon Senior Securities. 12
Item 4. Submission of Matters to a Vote of Security
Holders. 12
Item 5. Other Information. 12
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits 12
(b) Reports on Form 8-K 12
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PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Balance Sheets
September 30, December 31,
1997 1996
Assets (Unaudited)
Investment Property:
Cost $ 140,365 $ 4,363,083
Less accumulated depreciation 130,910 2,628,747
Less allowance for loss on
investment property - 900,000
Investment property, net 9,455 834,336
Cash and cash equivalents 410,107 156,932
Rents and other receivables 338 -
Total assets $ 419,900 $ 991,268
========== ==========
Liabilities and Partners' Equity
Liabilities:
Due to affiliates $ 999 $ 1,918
Accounts payable 337 705
Deferred gain on sale of asset - 166,866
Total liabilities 1,336 169,489
Partners' Equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 34,950 35,286
Cumulative cash distributions (386,163) (384,536)
(350,213) (348,250)
Limited Partners (24,137 units):
Capital contributions, net of
offering costs 10,707,885 10,707,885
Cumulative net income (191,284) 113,420
Cumulative cash distributions (9,747,824) (9,651,276)
768,777 1,170,029
Total partners' equity accounts 418,564 821,779
Total liabilities and partners'
equity $ 419,900 $ 991,268
========== ==========
See accompanying notes to financial statements.
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Income
(Unaudited)
For the Quarters and Nine Months
Ended September 30, 1997 and 1996
Nine Months Ended Quarter Ended
September 30 September 30
1997 1996 1997 1996
Revenue:
Rental income $ 2,625 $ 76,772 $ - $ 9,959
Interest income 1,387 21,906 759 7,264
Gain on sale of
investment property (53,413) 90,433 (53,413) 41,526
Total revenue (49,401) 189,111 (52,654) 58,749
Expenses:
Depreciation 229,335 319,152 46,980 92,406
General and
administrative 26,304 182,073 7,793 10,457
Total expenses 255,639 501,225 54,773 102,863
Net income $(305,040) $(312,114) $(107,427) $ (44,114)
======== ======== ======== ========
See accompanying notes to financial statements.
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Cash Flows
For the Nine Months ended September 30, 1997 and 1996
1997 1996
Cash flows from operating activities:
Net income $ (305,040) $ (312,114)
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 229,335 319,152
Gain on sale of investment property 1,120,279 (90,433)
Provision for loss on
investment property (900,000) -
Deferred gain on sales of investment
property (166,866) -
Changes in assets and liabilities:
Receivables (338) 132,242
Prepaid insurance - -
Due to affiliates (919) (3,312)
Accounts payable (368) (38,514)
Due to Pershing Lease Income Limited
Partnership - 25,102
Net cash provided by operating
activities (23,917) 32,123
Cash flows from investing activities:
Disposition of investment property 375,267 878,782
Cash flows from financing activities:
Cash distribution to Partners (98,175) (1,017,630)
Net increase (decrease) in cash and
cash equivalents 253,175 (106,725)
Cash and cash equivalents at
beginning of period $ 156,932 $ 386,282
Cash and cash equivalents at end of
period $ 410,107 $ 279,557
========== ==========
See accompanying notes to financial statements.
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Notes to Financial Statements
(Unaudited)
In the opinion of the General Partner, the accompanying unaudited
financial statements contain all adjustments necessary to present
fairly the financial position, results of operations and cash flows.
(1) Summary of Significant Accounting Policies
Organization
Pershing Lease Income Limited Partnership II (the "Partnership")
was organized under the Missouri Revised Uniform Limited Partnership
Act on February 24, 1989. The Partnership was formed to invest
primarily in equipment to be leased to third parties. The initial
capital of $1,500 represented capital contributions of $1,000 by
Waddell & Reed Leasing, Inc. (the General Partner) and $500 from the
initial Limited Partner. The Amended Agreement of Limited Partnership
authorized the issuance of up to 60,000 Limited Partnership units at a
price of $500 per unit and up to 20,000 additional units. The
Partnership had an initial closing and twelve subsequent closings. The
closings occurred on November 1, 1989, December 11, 1989, January 9,
1990, February 9, 1990, March 9, 1990, April 10, 1990, May 9, 1990,
June 11, 1990, July 11, 1990, August 9, 1990, September 12, 1990,
October 10, 1990 and November 1, 1990 with subscribers purchasing
6,887, 1,987, 2,264, 1,293, 904, 1,241, 1,071, 1,461, 1,114, 1,314,
2,050, 672 and 1,879 units, respectively.
Pursuant to the terms of the Amended Agreement of Limited
Partnership, distributable cash from operations and profits for federal
income tax purposes from normal operations, as defined, are to be
allocated 95% to the Limited Partners and 5% to the General Partner
until payout has occurred, and 85% to the Limited Partners and 15% to
the General Partner thereafter. "Payout" means the time when the
aggregate amount of all distributions to the Limited Partners of
distributable cash from operations and of distributable cash from sales
or refinancing equals the aggregate amount of the Limited Partners'
original invested capital plus a cumulative 8% annual return on their
aggregate unreturned invested capital (calculated from the beginning of
the first full fiscal quarter following each Limited Partner's
admission to the Partnership). Losses for federal income tax purposes
from the normal operations of the Partnership will be allocated 99% to
the Limited Partners and 1% to the General Partner.
The General Partner contributed $1,000 for its General Partnership
interest. The General Partner is not required to make any other
capital contributions except under certain limited circumstances upon
termination of the Partnership.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Notes to Financial Statements, Continued
(Unaudited)
Basis of Presentation
The Partnership financial statements are presented on the accrual
basis of accounting.
Cash and Cash Equivalents
Cash and cash equivalents in the accompanying statements of cash
flows include cash on hand and short-term investments with original
maturities of less than ninety days.
Investment Property
At September 30, 1997 and December 31, 1996, the Partnership owned
investment property, with a depreciable cost basis of $140,365 and
$4,363,083, respectively. Investment property at September 30, 1997
consisted of mining equipment. At December 31, 1996 investment
property also included an aircraft. The depreciable cost basis at
September 30, 1997 and December 31, 1996, includes acquisition fees of
$6,365 and $197,849, respectively, which were paid to the General
Partner. Depreciation on investment property is provided using
straight-line and accelerated methods over lives ranging from 5 to 12
years.
Organization Costs
Organization costs consist of legal and related costs to form the
Partnership and are being amortized over a five year period on a
straight-line basis.
Income Taxes
The Partnership is a pass-through entity and, accordingly, taxes on
income, if any, are the responsibility of the individual partners.
Partners' equity at September 30, 1997 as reported herein has been
reduced by sales commissions and other costs of the offering which will
not be deductible by the partners until the Partnership is liquidated
or the partners' units are otherwise disposed of.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Notes to Financial Statements, Continued
(Unaudited)
(2) Leases
The Partnership leases the investment property to unrelated third
parties under operating leases. Rental income is reported when earned.
There were no operating leases existing as of September 30, 1997.
(3) Related Party Transactions
Fees, commissions and other expenses paid or payable by the
Partnership to the General Partner or affiliates of the General Partner
for the quarter ended September 30, 1997 are as follows:
Reimbursable operating expenses $2,546
At September 30, 1997, the following costs were due to the General
Partner or affiliates:
Reimbursable operating expenses $ 999
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Partnership Operations
Due to the sale of investment property and lease expirations there
was no rental income for the third quarter of 1997; a decrease of
$9,959 from the third quarter of 1996. The Partnership's final lease
for construction equipment ended February 15, 1997 and it is being
remarketed. The Partnership sold the Fokker F-27 aircraft that it
owned on September 17, 1997. The proceeds from the sale were
$375,000.
Depreciation expense for the quarter was $49,980, down $42,426 from
the third quarter of 1996 due to the sale of $4.2 million in
equipment. General and administrative expense was $7,793 for the
quarter; down $2,664 from last year.
As of September 30, 1997, there were no leases in effect. The
Partnership has a mining shovel remaining that is being marketed. The
Partnership believes that it is more likely than not that the
remaining equipment will be sold rather than leased and the
Partnership liquidated. Although the Partnership does not know when
this will occur, it is possible it may occur during 1997.
Liquidity and Capital Resources
At September 30, 1997 the Partnership had sufficient cash to pay
operating expenses. As discussed above, the last piece of equipment is
being marketed. When it is sold, the Partnership plans to cease
operations and make its final cash distribution to the limited
partners.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Cash from Operations and Distributable Cash from Operations
Shown below is the calculation of Cash from Operations and
Distributable Cash from Operations for the quarter ended September 30,
1997 as defined by Section 17 of the Amended Agreement of Limited
Partnership:
Rental income $ -
Cash from sales 375,267
Interest income 759
Total cash inflow 376,026
Operating expenses (7,793)
Cash from operations 368,233
Reserve for distributions and operations 7,240
Partnership management fee -
Distributable cash from operations $375,473
=======
Allocation of Distributable Cash from Operations and Sales:
Operations Sales Total
Limited Partners $ 196 $371,514 $371,710
General Partner 10 3,753 3,763
$ 206 $375,267 $375,473
======= ======= =======
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Equipment Summary
(Unaudited)
Acquisition
Equipment Description Cost
Heavy Duty Equipment $140,365
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Default Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) Form 8-K - There have been no reports on Form 8-K.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(Registrant)
By: /s/ Michael D. Strohm
Michael D. Strohm, as Executive Vice
President, and Assistant Treasurer
of the General Partner
Date: November 24, 1996
By: /s/ Robert L. Hechler
Robert L. Hechler, President, Treasurer
Director of the General Partner
(Principal Accounting and Financial
Officer)
Date: November 24, 1996
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 410107
<SECURITIES> 0
<RECEIVABLES> 338
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 410445
<PP&E> 140365
<DEPRECIATION> 130910
<TOTAL-ASSETS> 419900
<CURRENT-LIABILITIES> 1336
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 418564
<TOTAL-LIABILITY-AND-EQUITY> 419900
<SALES> 0
<TOTAL-REVENUES> (49401)
<CGS> 0
<TOTAL-COSTS> 255639
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (305040)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (305040)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
